As of mid-March 2015, there’s been a further sizable plummeting of world export prices compared to a month earlier. In the case of the Chinese mills, their HRB export price FOB the port of export in some cases is now only about $375 per tonne versus $390 per tonne, previously.
For the non-Chinese mills, WSD’s feedback indicates that even international mills with the best reputation for product quality have been forced to slash their export price. As of mid-March 2015, the HRB export price in some cases has been only about $400 per tonne, FOB the port of export, versus an average of perhaps $465 per tonne a month earlier. Also, there’s been excess inventory for sale at sizable price discounts by traders and distributors.
WSD’s February 2015 World Cost Curve indicates that Chinese median-cost mill had a HRB operating cost of $421 per tonne and a marginal cost of $373 per tonne. In comparison, their ex-works price realization when exporting at $375 per tonne is only about $325 per tonne when subtracting about $20 per tonne for the cost to ship to steel to the port of export and about $30 per tonne for the 8% VAT (not a 17% valued added tax on exports because the Chinese government did not waive the 9% boron credit for wide hot-rolled band – as it did for most other products).
The Chinese mills simply can’t survive if they continue to price their home and export price for commodity-grade steels at or below marginal cost.
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